U.K. Still Holding Up Approval of Euro Bank Supervisor

Seeks Further Assurance That Rights of Individual Countries Will be Protected

By

Tom Fairless

Oct. 11, 2013 12:45 p.m. ET

BRUSSELS—The U.K. is blocking final approval of a powerful new supervisor for euro zone banks until it receives further guarantees that countries outside the currency union won't be disadvantaged.

At a meeting of European Union ambassadors on Friday, the U.K. asked to delay final approval of the so-called single supervisory mechanism for the third time in less than a month.

The single banking supervisor is the first leg of the euro zone's ambitious banking-union project, which aims to draw a line under the region's recent debt crisis. The hope is the new supervisor, under the auspices of the European Central Bank, will allow banking crises to be spotted—and dealt with—before they become systemic.

The legislation has already been approved by the European Parliament, and approval by EU member states is usually a formality at this stage.

Britain previously asked to postpone final approval of the legislation on Sept. 25, to allow its parliament to review last-minute tweaks that would give European lawmakers greater oversight of the supervisor's activities.

Now, the U.K. is also pushing for political assurances that safeguards introduced into the legislation—aimed at preventing the euro zone from pushing through financial rules as a bloc in decisions that affect the EU as a whole-—aren't watered down, EU officials said.

"We have consistently said that we support the creation of a euro zone banking union, but we have also been clear that there need to be safeguards to ensure the integrity of the single market is guaranteed, and that the rights of countries not taking part are protected," a U.K. government spokesman said.

ENLARGE

The U.K. and EU are at odds over euro-zone bank supervision.
Agence France-Presse/Getty Images

The safeguards aim to ensure that the new supervisor, which will cover the 17 euro zone states as well as any non-euro countries that choose to join, can't use its inbuilt majority of the EU's 28 members to dominate the European Banking Authority, which sets standards across the EU.

Under a deal hammered out in December, binding regulation can only be agreed by the EBA with a "double majority"— simple majorities of states both inside and outside the euro zone.

EU governments have agreed not to change that voting system until the number of EU states outside the banking union falls to four.

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However, British officials are now worried that the voting rules will be watered down once the single supervisory mechanism, or SSM, is agreed, and that those weaker rules will be applied to legislation on bank resolution—the second leg of banking union. An EU official said the U.K. wanted reassurance that changes to the voting rules in the EBA wouldn't happen for "a couple of decades."

"We're confident that we can get the assurances that we need and that this can be sorted out quickly," a British official said. The EU official said EU member states might circulate a text to reassure the U.K.

The U.K. has said that it won't participate in the banking union, but has worked hard to ensure its own supervisor doesn't get overpowered by the SSM in EU-wide decisions.

Chantal Hughes, a spokeswoman for the European Commission, the EU's executive, said she was confident the U.K.'s concerns could be resolved in "the next few days."

U.K. can't stop being a spoilsport .... first it let all major terrorist organizations from LTTE to Khalistan Tigers to operate not only freely within London but also granted its leaders asylum for few seats in Commons from ethnic dominated area from Croydon, Southall, Brad-istan, East End and so on. Now working on behalf of BANKSTERS from square mile to destroy any meaningful reform from pay cap to oversight!!! Please wake up!

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